what will be LIC surrender value after 5 years ?

What will be the LIC surrender value after 5 years? Many people say that if you surrender your policy after five years, even the deposited money will not be returned. And others believe that after five years, LIC adds interest to the surrender value.

Today you will know the LIC surrender value after 5 years and how to calculate its value yourself.

It is true that you must bear some loss whenever you discontinue your policy midway. But the policy surrender formula states that the more years you deposit the premium, the lesser the loss.

It is often seen that after about 7 or 8 years, you start getting benefits also.

LIC surrender value after 5 years

You need to know that there is no refund on the surrender of the term plan. But you get a fixed amount if you surrender any other plan like ULIP, endowment plan, whole life plan, etc.

LIC Surrender Value After about 5 years, LIC assures you to pay 85 to 90% of your deposited premium. But everyone’s surrender money will be different; to understand this, you must understand the policy surrender formula.

Before telling you the surrender value formula, I want to remind you that according to IRDAI rules, you can surrender all the policies taken after 31 January 2020, only after two years. Before this date, you could surrender all policies only after three years.

To understand the LIC surrender value after 5 years, you have to know that the surrender value calculation is done in two ways.

1 – Guaranteed surrender value

2 – Special surrender value

LIC surrender value after 5 years

Guaranteed surrender value

In Guaranteed Surrender Value, 30% of the premium, except the first year’s premium, is given as a guarantee.

This is the minimum amount that the insurance company gives on surrender, and it is mainly available upon completion of 3 years.

Special surrender value

As a matter of fact, the Special Surrender Value is usually calculated when you surrender a policy. Because if the paid-up value of the policy becomes zero, then the Guaranteed and Special Surrender Values will become equal.

learn more : LIC 1000 per month policy for 10 years

However, the special surrender value is always higher than the guaranteed surrender value.

paid-up value

If you stop paying premiums after a certain period of time, the value of your sum assured reduces over time; This reduced value is called paid-up value. With an example, you will understand everything easily.

Suppose Ramesh took a policy of 4 lakhs with a term of 20 years and after paying the premium for 5 years, he did not pay any premium.

Paid Up Value = Sum Assured × Premium Deposited Years / Total Term

Paid up value = 400000×5/20 = 100000

In this way, by paying only 5 years of premium, the paid up value reduces from 4 lakhs to 1 lakhs.

To understand the policy surrender formula properly, you must also know the surrender value factor. The insurance company determines the surrender value factor; hence there is a difference in the surrender value of different insurance companies.

IRDAI has no role in determining the surrender value factor. Usually, insurance companies keep it at 30 or 40 percent.

We can easily calculate the LIC surrender value after 5 years from this formula.

Surrender Value Formula = (Paidup Value + Bonus) × Surrender Value Factor

Thus, if you pay your premiums on time, you will get more LIC surrender value after 5 years than if you have a gap in between.

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